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The Easy Credit, High Interest Rate Swindle January 9, 2025
When 21% interest rate credit cards are the only thing keeping the lid on awakening and revolt, that's not a sustainable fix.
The easy credit, high interest rate swindle has been a financial feature of the landscape for so long it's rarely examined for what it is: not just a reliably profitable swindle, but as a safety valve for a broken system. We all know how it works, either from experience or observation: credit cards are distributed like candy on Holloween, with one little kicker: a dose of financial fentanyl is included: insanely high rates of interest, i.e. 21% and up, and rapacious late fees. The credit card issuers know most of the uncreditworthy creditors they sent cards to will eventually default, but this is fine because the high interest rates and stiff penalties will extract enough wealth from the debt-serfs to make the game profitable. This foreknowledge is what makes it a swindle: we know you want credit, we know you'll quickly get over your head and owe us a balance, and we know the exorbitant monthly interest on that ballooning balance will eat you alive, and you'll default. But we also know enough of you will struggle on, paying the interest and penalties, for long enough to make the swindle profitable: the writedowns of defaults will be more than offset by the interest and penalties. All this is obvious, and dismissed as "the free market in action:" nobody forced folks to accept the credit card, or forced the company to issue the cards, everyone knew the interest rate was 21%, and so high interest and defaults are just desserts to all involved. All this is certainly true: nobody was coerced into agreeing to those terms. But like everything else in our broken system, this isn't the whole story. The untold story is the decades-long decay of the purchasing power of wages has put the "American lifestyle" out of reach for many. In a consumer economy, only four things are valued: profits, wealth, power and attention. These provide status, i.e. a sense of selfhood in the social hierarchy. A consumer economy greases the gears of commerce with infinite desire: there's always a new "must have" novelty that grants status, a new experience that begs to be ticket-punched with a selfie, and in the Attention Economy created by social media platforms, another "like" or "heart" to seek for self-validation: look at me! I'm worthy of attention! Viewed through the lens of decaying purchasing power, credit is now necessary to fill the gap between earnings and expenses. Second and third gig jobs help fill the gap, but all the goodies of the "American lifestyle" are still out of reach without the plastic fantastic of credit. OK, so the take-home pay is $1,800, and the rent is $1,800, the gig jobs buy food and pay utilities, but what about the trip to Vegas and the tickets to the "must see" concert tour? Isn't this what credit cards are for? Indeed. At first, the gamers in the credit-casino see a way to win: pay off the balance at 21% with a 0% interest new card dangled oh so compellingly, and then repeat this more or less forever. But the swindlers know the game all too well, and after the third or fourth such offer, all the cards revert to 21%. Filling the gap between what wages once funded and what they no longer fund now with credit doesn't work because the interest soon consumes the income needed to pay for essentials. This widening gap between earnings and expenses must be filled, or those who can no longer afford the "American lifestyle" become a political wrecking ball. Imagine if credit card interest rates were capped at conventional 30-year mortgage rates plus 1%, so 7% plus 1% = 8% as the top rate for credit card balances. And imagine late fees were capped at $20. Credit card lenders would immediately stop issuing cards to uncreditworthy households, as the losses would no longer be covered by sky-high interest rates and penalties. Absent the 21+% interest rates, credit is no longer profitable except to those with very high credit scores--the type of people who pay off the cards every month, paying the issuers zero interest or penalties. Oh boo-hoo, there goes our fat profits. The reality is easy credit is the safety valve for a system that is no longer affordable to the masses depending on wages for their livelihood. Without easy credit, people would be forced to wake up to the reality that the "American lifestyle" they desire is out of reach, and this will eventually anger them as they see the top 10% enjoying the riches bestowed by asset bubbles, and the next 10% enjoying the professional salaries and benefits of top earners. When the essentials are no longer affordable, people start doing things like tearing down the Bastille, and authorities respond by suppressing the rage with a whiff of grapeshot, and then things unravel faster than anyone believed possible. It's increasingly common to promote a debt jubilee as the solution, but this doesn't address the core issue, which is the widening gap between earnings and the cost of essentials. A debt jubilee is just another flavor of an expedient stopgap measure intended to keep the broken, corrupt system glued together for another year or two, to make it seem as if the system isn't fundamentally broken and soaring inequality isn't its primary dynamic. When 21% interest rate credit cards are the only thing keeping the lid on awakening and revolt, that's not a sustainable fix. As noted here recently, the problem with using financial fentanyl as the "solution" is no one can tell if the dose is fatal until it's too late. 
My recent books: Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site. The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $18, (Kindle $8.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF) Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF) The Asian Heroine Who Seduced Me (Novel) print $10.95, Kindle $6.95 Read an excerpt for free (PDF) When You Can't Go On: Burnout, Reckoning and Renewal $18 print, $8.95 Kindle ebook; audiobook Read the first section for free (PDF) Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF). A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF). Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World (Kindle $5, print $10, audiobook) Read the first section for free (PDF). The Adventures of the Consulting Philosopher: The Disappearance of Drake (Novel) $4.95 Kindle, $10.95 print); read the first chapters for free (PDF) Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free Become a $3/month patron of my work via patreon.com. Subscribe to my Substack for free The Mythology of Progress, Anti-Progress and a Mythology for the 21st Century print $18, (Kindle $8.95, Hardcover $24 (215 pages, 2024) Read the Introduction and first chapter for free (PDF) 
What if growth--and policies to accelerate growth--are no longer working because our fix for every problem--growth for growth's sake--is failing? We're told Progress is inevitable as a result of technology, but everyday life is getting harder, not easier--the opposite of Progress, what I call Anti-Progress.
What if the real source of the unraveling is far deeper than economics or politics? What if the problem is what we see as the inevitable destiny of humanity--Progress--is actually a modern mythology, disconnected from the real-world consequences of growth for growth's sake? We indignantly reject that Progress is a mythology, but our need for mythology hasn't gone away because we've mastered technology; we've created a modern mythology of technology that is heedless of its own consequences. To truly progress, we need a new mythology aligned to 21st century realities. That's the goal of this book. Read the Introduction and first chapter for free Self-Reliance in the 21st Century print $18, (Kindle $8.95, audiobook $13.08 (96 pages, 2022) Read the first chapter for free (PDF) 
Just as no one was left unaffected by the rise of globalization, no one will be unaffected by its demise.
The only response that reduces our vulnerability is self-reliance: de-risk your life by carving a path that works for you.
When Ralph Waldo Emerson wrote his famous essay Self-Reliance in 1841, the economy was localized and households supplied many of their own essentials. Now we're dependent on distant sources for our essentials. For Emerson, self-reliance is thinking for ourselves rather than taking the conventional path. Self-reliance today means reordering our priorities and values. Self-reliance is often confused with self-sufficiency--the equivalent of Thoreau's cabin. But self-reliance isn't about piling up money or an isolated cabin; it's about cooperating with trustworthy others in productive networks. The book details the essential mindset of self-reliance and 18 nuts and bolts principles of self-reliance in the 21st century. Podcast with Richard Bonugli: Self Reliance in the 21st Century (43 min)
Recent entries: The Easy Credit, High Interest Rate Swindle January 9, 2025 I Quit! The Tsunami of Burnout Few See January 7, 2025 High Interest Rates Are Healthy, Low Rates Are Poison January 6, 2025 The System's Self-Destruct Sequence Cannot Be Turned Off January 3, 2025 Too Big to Care and the Illusion of Choice December 30, 2024 What If Solutions That Worked in the Past No Longer Fix What's Broken? December 26, 2024
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Extra-Special Bonus Aphorisms:
"There is no security on this earth; there is only opportunity." (Douglas MacArthur) "We are what we repeatedly do." (Aristotle) "Do the thing and you shall have the power." (Ralph Waldo Emerson) "Any intelligent fool can make things bigger, more complex, and more violent. It takes a touch of genius and a lot of courage to move in the opposite direction." (E.F. Schumacher, via Tom R.) "He who will not risk cannot win." (John Paul Jones) "When we drink coffee, ideas march in like the army." (Honore de Balzac) "Progress is not possible without deviation." (Frank Zappa, via Richard Metzger) "Victory favors those who take pains." (amat victoria curam) "The man who has a garden and a library has everything." (Cicero, via Lee Bentley) "A healthy homecooked family meal and a home garden are revolutionary acts." (CHS) "Do you know what amazes me more than anything else? The impotence of force to organize anything." (Napoleon Bonaparte) "The way of the Tao is reversal" Or "Reversal is the movement of Tao." (Lao Tzu) "Chance favours the prepared mind." (Louis Pasteur) "Success consists of going from failure to failure without loss of enthusiasm." (Winston Churchill) "Where there is ruin, there is hope for treasures." (Rumi) "The realm of gratitude is boundless." (CHS, 11/25/15) "History doesn't have a reverse gear." (CHS, 12/22/15) Smith's Law of Conservation of Risk: Every sustained action has more than one consequence. Some consequences will appear positive for a time before revealing their destructive nature. Some consequences will be intended, some will not. Some will be foreseeable, some will not. Some will be controllable, some will not. Those that are unforeseen and uncontrollable will trigger waves of other unforeseen and uncontrollable consequences. (July 8, 2014)(thanks to Lew G. for retitling the idea.) Smith's Neofeudalism Principle #1: If the citizenry cannot replace a kleptocratic authoritarian government and/or limit the power of the financial Aristocracy at the ballot box, the nation is a democracy in name only. The Smith Corollary to Metcalfe's Law (The Network Effect): the value of the network is created not just by the number of connected devices/users but by the value of the information and knowledge shared by users in sub-networks and in the entire network. (CHS, 4/6/16) My Credo of Liberation: I no longer care if the power centers of our society--the distant, fortified castles of our financial feudal system--are changed by my actions, for I am liberated by the act of resistance. I am no longer complicit in perpetuating fraudulent feudalism and the pathology of concentrated power. I no longer covet signifiers of membership in the Upper Caste that serves the plutocracy. I am liberated from self-destructive consumerist-State financialization and the delusion that debt servitude and obedience to sociopathological Elites serve my self-interests. (Thank you, Klaus-Peter L., for reminding me) "We've become a culture of excuses rather than solutions: solutions always require sustained effort and discipline." (CHS 4/9/16) "Fraud as a way of life caters an extravagant banquet of consequences." (CHS 4/14/16) "Creativity = problem solving = value creation." (CHS 6/4/16) "Truth is powerful because it is the core dynamic of solving problems." (CHS 7/21/17) "We live in a system of human emotions that masquerades as a science (economics)." (CHS 1/1/18) "Always remember, your focus determines your reality." (George Lucas) "Diversity is for poor people. Sameness is for the successful." (GFB) "When power dissipates suddenly, it dissipates completely." (CHS 7/14/19) "Disobedience is the true foundation of liberty. The obedient must be slaves." (Henry David Thoreau) "Markets cannot price in the value of non-monetized natural assets such as diverse ecosystems." (CHS 7/14/19) "Magical thinking isn't optimism, it is folly." CHS 1/3/22) "Tune in (to self-reliance), drop out (of hyper-consumerism and debt-serfdom) and turn on (to relocalizing capital and agency)." (CHS 1/5/22) "The path to everything you desire starts here: like yourself as you are right now." (CHS 11/20/22) "There are only two signals: how many essentials you produce and share and if you're consuming less with better results. Everything else is noise." (CHS 12/17/22) "Liberation is no longer needing any confirmation or feedback from others or the world for one's sense of self. Wealth, fame, recognition, admiration, praise, prestige, approval, sainthood, martyrdom, success: none are needed, none are desired." (CHS 12/26/22) "When fame, wealth, prestige, status and glory are out of reach, you're free to pursue other more valuable things." (CHS 2/6/22) "It is the sacred duty of every activist who seeks to better their community to grow and share as much life-giving food as is humanly possible." (CHS 6/15/23) "Being anonymous, gray and unknown is the ideal state of freedom." (CHS 3/15/24) "We seem to have entered a world of anti-leisure and anti-productivity in which the unpaid shadow work demanded to keep all the complicated digital bits in motion obliterate our leisure and productivity." CHS (5/22/24) "It is axiomatic that failing systems work the best just before they fail catastrophically." Ray W. "Looking younger is mere technique; thinking younger demands creativity." CHS (10/16/24) "Tell me what's taboo and I'll tell you the truths that threaten the status quo." CHS (12/15/24) |
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